There's a humorous adage in newsrooms that reporters have low salaries because of "journalism math" — if they could add and subtract, they'd figure out how little they were being paid.

While there might be some truth to that phrase, many reporters put in long hours poring over the budgets of corporations and government agencies. So they've got some ability to read a balance sheet.

Many executives of newspaper chains, on the other hand, rarely set foot in a newsroom. As far as their math skills go, you make the call:

Just two weeks after acknowledging a $78 million loss in 2013, the parent company of the Arizona Daily Star gave top executives Thanksgiving-eve gifts of company stock worth over $1.25 million — including 200,000 shares worth $722,000 given to Mary Junck, head of Iowa-based Lee Enterprises.

The bonus to Junck follows two totaling over $1.1 million given to her after the national newspaper chain exited bankruptcy in 2012.

Lee Enterprises stock closed at $3.61 the day before Thanksgiving, meaning the stock bonuses were then valued at over $1.25 million:

Lee lost $77.7 million in fiscal year 2013, far exceeding 2012's loss of $16.3 million. The company did manage to pay down $98.4 million of its near billion-dollar debt, leaving a balance of $847.5 million.

"Aggressive digital and subscription revenue and business transformation initiatives have enabled Lee to continue strong, improving cash flow and rapid debt reduction," said Lee CEO Mary Junck in a statement.

Lee's digital advertising was up just 1.8 percent, with subscription revenues seeing the same percentage bump. Both amount to but a fraction of the chain's overall revenues, which remain largely dependent on print advertising. Page views for all digital platforms were up 9.4 percent, the company said.

Translated out of bizspeak, the company is continuing a years-long spiral that sees it employing fewer journalists, printing fewer papers that are delivered to fewer subscribers, and running fewer advertisements.

The same day the company spun its increased losses, it hailed the Star as the chain's "Enterprise of the Year." Although the announcement was made Monday, the paper had not reported it more than two weeks later.

"The operations of Lee have been gutted and the result is an enterprise on the precipice of decline," the analyst wrote:

The phrase "burning the furniture to heat the house," is meant to express the desperate measures that some people will take in order to stay warm and therefore alive. It also symbolizes actions that are ultimately futile - after all, once the furniture is burnt you have nothing left to burn to keep yourself warm. It's a stopgap measure that is ultimately both destructive and fails to obviate the final outcome - being left in the cold. We believe that Lee Enterprises (LEE) has been burning its furniture to stay alive by aggressively cutting costs in order to service its crushing debt load. While these actions have so far allowed the company to keep its EBITDA relatively stable, the current level of profitability looks unsustainable and additional cost savings are probably impossible.

***

Since the beginning of 2010, Lee Enterprises has
reduced its headcount from 6,304 people to 4,678, a decline of 26%. If
you're wondering how this is possible, it's not from getting people to
work smarter or harder. Firing 26% of the workforce was made possible by
the company's decision to shrink its newspapers. Over the same time
period, the volume of newsprint consumed by the company has declined by
30%. In case you think that the decline is simply due to fewer
subscribers, the newsprint produced per subscriber has also declined by
14% over this period, which means not only that Lee has fewer
subscribers, but also that each of Lee's subscribers is reading a
smaller newspaper. They are selling into a shrinking consumer base that
also consumes fewer newspapers. The end result of firing so much of its
staff is that LEE now produces a substantially less robust product than
it previously did.

Bankruptcy

Lee
has been laboring under a near-$1 billion debt, much of which was to become
due in April 2012. The bankruptcy prepared by the chain pushed the due dates
back to December 2015 and April 2017, while hiking interest rates from
5.1 to 9.2 percent and diluting the company's shares by 13 percent.

The company contended the Chapter 11 reorganization would give it time to right its finances.

The
company reached terms with the majority of its debt holders in 2011,
but had to go to court to force the terms on a minority of its lenders.

While
the majority of Lee's debt holders agreed to push back the due date on
the loans two years, about 3 percent of the company's lenders were
non-consenting, a spokesman said in a release at the time.

Lee owns 48 newspapers around the country, with joint interest in four others, including the Star.

In 2011, the Star laid off 52 workers,
including about 15 newsroom employees, in a cost-cutting move. The
newsroom has since shrunk further as other employees have left the
paper.

The
company's partner in the Tucson paper, Gannett Inc., is the former
publisher of the Tucson Citizen. While the press stopped rolling for
that paper in 2009, Gannett and Lee remain partners in the South Park
operation.

Lee took on the huge debt load to finance the 2005 acquisition of the
Pulitzer newspaper chain for $1.46 billion, which brought it the Star
and the St. Louis Post-Dispatch, among others.

Part of Lee's debt, $138
million known as the Pulitzer Notes, was inherited with that purchase,
and is secured by the assets of the former Pulitzer chain, including the
Star.

Two years ago, Lee was faced with having its stock delisted from the New York Stock
Exchange after trading below $1 for months. That threat has abated
somewhat since the bankruptcy filing, as Lee has traded at slightly more
than the dollar threshold.

Wednesday, Lee held at $3.51.

In 2004, Lee stock sold for $49.

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have your say

1 comment on this story

I wonder how many home-delivery subscribers realize they paid a $2 premium for the 900-plus page Thanksgiving issue of the Star. The same issue that hundreds of advertisers paid a premium for ad space. Nothing like double-dipping, huh?

I hope the Star’s online access is FREE to those of us who already pay hundreds to get the dead-tree version dropped near our doorsteps. I don’t intend to pay twice.

Sorry, we missed your input...

Whither the paywall?

Last July,
Junck touted the success of the company's paywall plan, saying, "We
introduced digital subscriptions in 11 more markets during the quarter,
for a total of 17 so far, and expect nearly all of Lee's 52 markets to
follow by the end of the calendar year."

While sources at the Star have indicated that a paywall for the newspaper's website remains under development, a roll-out date hasn't yet leaked.

The St. Louis Business Journal reported Tuesday that Lee's paper in that city, the Post-Dispatch, may implement a paywall early next year. A Lee customer service employee let slip that that publication will begin charging online readers soon.

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